Cost 1 2

ADDIS ABABA UNIVERSITY
COLLEGUE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
COST AND MANAGEMENT ACCOUNTING I
MID TERM EXAM (30%)
Time Allowed: 1hr
Name____________________________
Id. No____________
Dep’t__________
section____
PART I: MULTIPLE CHOICES
1. The cost of lubricants used to grease a production machine in a manufacturing company is an example
of a(n):
A) period cost. C) indirect material cost.
B) direct material cost. D) none of the above.
2. The salary paid to the president of King Company would be classified on the income statement as a(n):
A) administrative expense. C) manufacturing overhead cost.
B) direct labor cost. E) none D) selling expense.
3. Prime cost and conversion cost share what common element of total cost?
A) Direct materials. C) Variable overhead.
B) Direct labor. E) none D) Fixed overhead.
4. Property taxes on a company's factory building would be classified as a(n):

A) product cost. C) period cost.
B) opportunity cost. E) none D) variable cost
5. All of the following would be classified as product costs except:

A) property taxes on production C) salaries of the advertising staff.
equipment. D) wages of machine operators.
B) insurance on factory machinery.
E ) none
6. Ross Corporation shipped finished goods to a customer on credit, but the sale was not recorded and the
costs of the finished goods were incorrectly included on the period's balance sheet as part of the
finished goods inventory. Which one of the following statements is correct concerning the effects of
this error?
A) Accounts receivable was not affected, inventory was overstated, sales were understated, and cost
of goods sold was understated.
B) Accounts receivable was understated, inventory was not affected, sales were understated, and cost
of goods sold was understated.
C) Accounts receivable was understated, inventory was overstated, sales were understated, and cost
of goods sold was overstated.
D) Accounts receivable was understated, inventory was overstated, sales were understated, and cost
of goods sold was understated. E) none
7. John Johnson decided to leave his former job where he earned Br. 15per hour to go to a new job where
he will earn Br. 20per hour. In the decision process, the former wage of Br. 15 per hour would be
classified as a(n):
A) sunk cost. C) fixed cost
B) direct cost. D) opportunity cost.
E) none
8. Addis Company's manufacturing overhead is 20% of its total conversion costs. If direct labor is
birr38,000 and if direct materials are $35,000, the manufacturing overhead is:
A) $18,250 C) $8,750
B) $9,500 D) $152,00
E) none
Part two: short writing

1. Clearly define sunk cost, joint cost, common cost, avoidable cost, period cost and differential cost.
PART TWO: WORK OUT

1. Using the following data for March, calculate the cost of goods manufactured:
Direct materials ..................................................Br. 29,000
Direct labor ............................................................ 19,000
Manufacturing overhead ........................................ 27,000
Beginning work in process inventory.................... 11,000
Ending work in process inventory ......................... 12,000
Required: calculate the cost of goods manufactured
2. Use the following to answer questions below:

The following data have been taken from the accounting records of Horngren Corporation for
the just completed year.
Sales ..................................................................br. 930,000
Raw materials inventory, beginning ..................... 70,000
Raw materials inventory, ending ........................... 40,000
Purchases of raw materials .................................... 190,000
Direct labor ............................................................ 150,000
Manufacturing overhead ....................................... 210,000
Administrative expenses ....................................... 90,000
Selling expenses .................................................... 120,000
Work in process inventory, beginning .................. 80,000
Work in process inventory, ending....................... 70,000
Finished goods inventory, beginning.................... 90,000
Finished goods inventory, ending ......................... 140,000
Required: a. calculate the cost of the raw materials used in production during the year.
b. compute the cost of goods manufactured (finished) for the year.
c. compute the cost of goods sold for the year.
d. compute the net operating income for the year.
3. The following information is taken from the records of DW Company for last year:
Direct materials .............................................birr8,000
Direct labor .........................................................3,000
Manufacturing overhead ....................................11,000
Ending work in process inventory .......................5,000
Cost of goods manufactured ...............................19,000
Required: calculate the amount of beginning work in process inventory

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ADDIS ABABA UNIVERSITY

COLLEGUE OF BUSINESS AND ECONOMICS

4. Property taxes on a company's factory building would be classified as a(n):

5. All of the following would be classified as product costs except:

Part two: short writing

PART TWO: WORK OUT

2. Use the following to answer questions below:

Required: calculate the amount of beginning work in process inventory

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